Because entry costs into the market in terms of intellectual and physical capital is high, new de novo suppliers are not significant threats. Rivalry among providers remains intense driven by strategic alliances and consolidations among current suppliers and buyers. Substitution of lower cost place of service and mid-level providers reduces cost but it may not necessarily increase efficiency or improve outcome. Additionally, as substitution commoditizes health care services you run the risk of entering a ‘red sea’ competition driving costs to the bottom, which is not a viable strategy over time.

Cleveland Clinic and its marquee brethren exploit the advantage of experience, volume and organization through affiliations with local providers permitting their access to marquee clinical and management practices, hands-on consultation and quality tracking. But like other business models of this type, it is the ‘last mile’, the actual delivery that is problematic. There are cultural differences in how we seek and accept healthcare and it becomes the role of local providers to bridge that gap.

So what can be done, to derive strategic advantage in such a market? In an era of bundled care and lengthening episodes of care the knowledge within your physicians, staff and post discharge providers and their relationship with one another are your primary currency.

Knowledge is our view of the world, the totality of our experience. Knowledge is subject to our changing experience and is shaped by perceptions of what we know and how we express ‘our reality’. Knowledge is born of information created through social interaction with a specific context binding it to a specific time and place. This is the basis for the success of a Cleveland Clinic or a Hospital for Special Surgery. Your physician staff and post discharge providers form a similar social network of interactions describing your way of doing, your extensive local knowledge.

Knowledge is frequently described as explicit or tacit. Explicit knowledge is easily codified, as a checklist or as a protocol. Tacit knowledge is more experiential, grounded in our ‘intuitive’ cognition; it is judgment, a nuanced understanding of technical issues or perceptions like body language, tonal inflection or veracity.

The paradox of knowledge lies in the fact that its acquisition requires individuals with highly specific understanding while its implementation requires individuals with many areas of specialized knowledge. That transformation requires physically bringing together a group to explicate their tacit knowledge, find consensual meaning and then recombine the now explicit components of their tacit knowledge into a new path. The conversion of craft knowledge and skills created leverage and scalability forming the basis for the Industrial Age. The conversion of tacit to explicit knowledge is the basis for competitive advantage in healthcare’s knowledge age. Tacit knowledge has strategic advantage because it is potentially valuable, rare and hard to imitate. It is organization specific and held by individuals. Because individuals hold it, it cannot scale to meet demand, reducing its advantage. But codification of tacit knowledge makes it imitatable. So transferring and codifying knowledge to achieve the requisite scale may lose strategic advantage allowing rivals to create/imitate best practices.

When the external environment is unstable and dynamic all competitive advantage is eroded by either imitation or innovation, thus continuous improvement through extension of existing capabilities or reconfiguring existing knowledge is the only real source of sustainable competitive advantage. Knowledge assets achieve their greatest value when they are internally created and utilized forming a difficult to imitate resource. Knowledge management predicated upon the empowered facilitated social interaction of individuals with specialized knowledge around their expertise and its systemization for the enterprise is the new competitive advantage. This is the strategic advantage that the marquee providers are now exploiting.

Enterprises can obtain this knowledge in several ways. The traditional means of obtaining knowledge assets resides in transactions acquiring the assets underlying the knowledge (personnel) or purchasing products with embedded knowledge, the current ‘franchise’ model of national leaders. Knowledge may be acquired by linking specialized networks. Here strategic alliances or other partnerships create flexibility by expanding knowledge linkages and permit a rapid expansion and utilization of knowledge through efficiencies in combining established networks. This is mirrored in the latest phase of healthcare franchising as PHOs with national reach in specific areas are formed under the tutelage of a marquee player e.g. MD Andersons cancer outreach or Cleveland Clinics Orthopedic model. Finally, it can come from within the firm through the management of core capabilities including stimulation of the network by sharing information and creating opportunities to meet and interact. Firms also promote development of expertise coordinating common solutions between units. When there is a great deal of variation in performance of a common capability the company may impose enterprise best practices. While seemingly more difficult to accomplish, it is a more secure foundation for long-term advantage.

Healthcare’s knowledge management involves three components; an enabling service that identifies, collects, organizes and model knowledge; a service that operationalizes and utilizes the acquired knowledge and a transformational component. In this transformational environment, change agents or knowledge brokers, bridge two or more communities of practice exchanging relevant information and creating forums flexible enough to accommodate differing perspectives but providing continuity of thought between the groups using them. Brokers serve as credible messengers integrating, interpreting and transmitting information and organization. To the extent that you can effectively bridge networks with knowledge brokers and forums you avoid the cost of needless vertical integration of post discharge care.

The bottom line

If this makes strategic sense to you, we should talk. You organization already has tacit knowledge and social relationships that can be aligned to your advantage. Your administrative data and the Medicare Spending per Beneficiary information provided by CMS provide the data to visualize your social networks, their costs and outcomes.

“The adjacent possible is a kind of shadow future, hovering on the edges of the present state of things, a map of all the ways in which the present can reinvent itself.”

The adjacent possibility is the combination of the choices you have made to create your present, the forces acting upon you today and the understanding that change in iterative and incremental. It is you’re near future. Surgical Analytics helps you explore your adjacent possibility defining a path to sustain and grow your enterprise.

Few hospitals, let alone large practices contemplating care models like medical homes or accountable care organizations have the analytic expertise or budgetary resources for the necessary performance improvement work and find themselves in a healthcare market requiring enhancing value, by raising quality and decreasing cost without a clear path forward.

Surgical Analytics takes information locked in enterprise information systems identifying trends and care patterns in the quality and safety of care your organization provides and their impact upon operational costs and key performance indicators such as readmissions,

Knowing is insufficient, to have impact, knowledge must become action. Even with the help of ‘best-practice’ guidelines change implementation requires understanding your culture, your enablers and your doubters, your means to effect change. All quality improvement is local. Facilitating change is a skill that like analytics is scarce.

Surgical Analytics provides expertise for actionable performance improvement; you supply an understanding of your business’s culture. The collaborated effect of your data, and our expertise brings best practices and innovative approaches to you. We want to be your partner. A team member you can see and talk with, companions exploring your adjacent possibility, creating value for your patients.